Social Welfare rates must increase in Budget 2021

Posted on Tuesday, 29 September 2020
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The Covid-19 crisis has highlighted a number of aspects of the welfare state and the importance of properly provided and funded public services in countries across the world. Among the many lessons in this country, the crisis has highlighted the importance of the social safety net that is our social welfare system. For many, the experience has also illustrated the substantial challenges of life on a low income; even when that income is considerably higher than the value of core social welfare payments that many unemployed people, pensioners and people with long-standing illness and disabilities struggle with persistently.

Over a decade ago, Budget 2007 benchmarked the minimum social welfare rate at 30 per cent of Gross Average Industrial Earnings (GAIE). Today that figure is equivalent to 27.5 per cent of the new average earnings data being collected by the CSO. Applying this benchmark using CSO data for 2019 and ESRI projections for wage growth in 2020 allows us to compare this benchmark with current welfare rates.

In 2020 the updated value of 27.5 per cent of average weekly earnings equals €221, implying a shortfall of €18 between current minimum social welfare rates (€203) and this threshold.   Given the importance of this benchmark to the living standards of many in Irish society, and its relevance to anti-poverty commitments, the current deficit highlights a need for the new Government, and Budget 2021, to further increase minimum social welfare rates and commit to converging on a benchmark equivalent to 27.5 per cent of average weekly earnings.

Social Justice Ireland suggests increasing core social welfare rates by €7 per annum over the next three years, in order to meet this benchmark (accounting for likely earnings increases) by 2023. Alternatively, government can increase core rates by €10 per annum over the next two years to meet this target by 2022.

Social Justice Ireland welcomed the increases in core social welfare rates made since 2016, however we regret the decision not to increase social welfare rates in Budget 2020.  Average earnings to the end of Q2 2020 increased by 6 per cent, whereas core social rates have seen no increase since Budget 2019.  The gap between those reliant on social welfare and those on average weekly earnings is growing.   Social welfare rates must be increased in Budget 2021, in line with a movement towards 27.5 per cent of average weekly earnings in order to address this growing problem.  If not, then this Government will leave those who are most vulnerable behind. 

A lesson from past experiences of economic recovery and growth is that the weakest in our society get left behind unless welfare increases keep track with increases elsewhere in the economy.  Benchmarking minimum rates of social welfare payments to movements in average earnings is therefore an important policy priority.  Since 2016 average weekly earnings have increased by 16 per cent, this is double the rate by which social welfare rates have increased in this period. Budget 2021 must increase core social welfare rates to address this. 

Read full details of our proposal on indexation and social welfare for Budget 2021 here.